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Clinical Redesign: Engaging Physicians in Co-Leading Financial ImprovementAndrew Agwunobi,MD,MBA
Opinions expressed are those of the individual author(s) and do not represent the opinions of BRG or its other employees and affiliates.
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Dr. Andrew Agwunobi
Dr. Andrew Agwunobi is a leader of Berkeley Research Group’s Hopsital Performance Improvement practice. Before joining BRG, Dr. Agwunobi served as Chief Executive of Providence Healthcare, a five-hospital region of Providence Health & Services in Spokane, Washington.
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Hospitals Are Making Financial Progress…But
Aggregate Total Hospital Margins,(1) Operating Margins(2) and Patient Margins,(3) 1992 – 2012
Total Margin
Operating Margin
Patient Margin
-6%
-4%
-2%
0%
2%
4%
6%
8%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source Graph : American Hospital Association Trendwatch Chartbook 2014, http://www.aha.org/research/reports/tw/chartbook/ch4.shtml
“…the average operating margin in 2013 was 3.1%, down from 3.6% in 2012 based on data available for 179 health systems, …A total of 61.3% of organizations in Modern Healthcare's analysis saw their operating margins deteriorate over the previous year.
2013
Source quote : “Fewer hospitals have positive margins as they face financial squeeze By Beth Kutscher Modern Healthcare http://www.modernhealthcare.com/article/20140621/MAGAZINE/306219968Posted: June 21, 2014
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Many Are Still Struggling
Chart 4.1: Percentage of Hospitals with Negative Total and Operating Margins, 1995 – 2012
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2012, for community hospitals, and *DefinitiveHC database. .
Negative Operating Margin
Negative Total Margin
…and The Next Few Years Wont Be Easier
“Even the strongest hospitals and health systems are, at best, only likely to hold existing margin and reserve levels, (assuming investment market growth) while weaker providers will likely see ongoing operating margin and cash flow erosion and eventually balance sheet pressure leading to rating deterioration which has already materialized and will continue in 2015.”
Martin Arrick Managing Director Standard & Poors
Financial Pressures will Continue
• Weaker revenue environment– Still related to the economy with high levels of unemployment and
underemployment, reduced health insurance benefits (high – deductible plans)– Medicare: sequestration, HAC penalties, re-admit penalties– Commercial plans offering smaller rate increases, seeking value based contracts
• Heightened competition for (in)patients; utilization trends remain generally weak
• Increased spending on information technology and physician employment– Cost of employing physicians without commensurate rise in volumes
• Many of the ‘easier’ cost cutting tactics already deployed
• Capital pressures building; must shift to an ambulatory strategy
• Pace of ‘reform’ highly variable
Source: Martin Arrick Managing Director Standard & Poor’s
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
100
200
300
400
500
600
Affirmation Downgrades Upgrades
U.S. Not-For-Profit Acute Health Care Rating Actions 2014
Data as of December 31, 2014
Source: Standard & Poor’s
Sample Hospital: “Reaching Beyond the Low Hanging Fruit- Finding the Next 20%”
20%
Historical margins
Labor
RevenueCycle
New margins
Elective volume declines
Payer mix worsens
Continued IP shift to OP
Heightened Competition
Operations, IT, MD hiring
11%
Non Labor
Clinical Redesign Traditional
27%
13%
HR
71%
Clinical VariationModels of Care Physician PracticesLOS/Throughput
29% 29%
Source: BRG analyses and experience
36M
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What is Clinical Redesign?
Clinical Redesign comprises innovative efforts to reduce inpatient and outpatient clinical costs using a physician co-designed and co-implemented model that:
• Sustainably improves health system margins• Protects or enhances quality outcomes• Harnesses and aligns physician participation• Promotes physician integration within the organization• Reduces the clinical cost structure and cost per case thus
enhancing ability to bear risk
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Examples of Clinical Redesign:
APR-DRG 174 & 175 – Percutaneous Cardiovascular Interventions with & without AMI
Analyzed inpatient stent procedures with an MS-DRG of 246 – 249 (PCI procedure with DES or
non-DES stent)
Variation identified in the following areas:
• Number of stents used per case
• DES v. BMS usage ratio
• IVUS catheter utilization
• Antiplatelet therapies
• Length of stay
Outcome: Interventionalists held monthly meetings to discuss evidence based guidelines for
the identified drivers of variation as well as all discuss all cases where 2+ stents were placed.
Resulted in $1.02M reduction in costs over 9 months.
Moderate & Minor
10500 11000 11500 12000 12500 13000 13500 14000 14500 15000 15500 16000 16500 17000 17500 18000Average Total Cost per Case
Baseline (Sept2012 - Aug2013)
Project Period(Jan - Sept2014)
0
20
40
60
Cases
0
20
40
60
Cases
Average Cost - $14,954
Average Cost - $12,415
BC - Lower Severity CpC
High cost Cardiology group reduced costs by more than $1M in 9 months
1) Clinical Variation Reduction
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Examples of Clinical Redesign:
2) Models of Care
650 Bed tertiary hospital 470 Bed community hospital
Action: extends hospitalist service to health system-owned Skilled Nursing Facility (SNF)
Action: redesign intensive care unit model including MD staffing, acuity of patients managed without intensivist consult, palliative care screenings, multi-disciplinary clinical delivery, and virtual stepdown
Outcome: reduces SNF related ED visits by 30%
Outcome: Despite volumes increasing and CMI remaining stable, the unit specific ALOS dropped from 3.7 to 2.5
Effort co-leadership by
hospitalists
Effort co-leadership by intensivists, surgeons,
hospitalists
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3) Clinical Variation Reduction
APR-DRG 221 – Major Small & Large Bowel Procedures
5 procedures analyzed for opportunity:
1. Lap Hemicolectomy
2. Open Hemicoletcomy
3. Lap Sigmoidectomy
4. Open Sigmoidectomy
5. Partial Small Bowel Resection
Identified:• Variation in potentially preventable complications• Overutilization of ICU, routine CXRs, and TPN• Opportunity to reduce ALOS.
Outcome: Surgeons decided to adopt evidence based practice pathways for these 5 Procedures-Total $ opportunity identified $631,000.
Effort co-leadership by 7 surgeons
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Without Physician Engagement Clinical Redesign Just Doesn’t Work
(1)
1) Source: “Hospitals' Race to Employ Physicians — The Logic behind a Money-Losing Proposition” (NEJM)Robert Kocher, M.D., and Nikhil R. Sahni, B.S. N Engl J Med 2011; 364:1790-1793May 12, 2011DOI: 10.1056/NEJMp1101959
“More than half of practicing U.S. physicians are now employed by hospitals or integrated delivery systems”-NEJM 2011
Getting Serious- Physician Leadership is Essential to Redesign
Page 15
Employed or Independent – The Trend Physician Practices has Surpassed Physician Ownership.
» In 2010, MGMA found that the share of hospital-owned practices reached 68% vs. 30% in 2004.
Source: MGMA Physician Compensation and Production Survey Report ; Organization Ownership 2011 based on 2010 data; Wall Street Journal, “Shingle Fades as More Doctors Go To Work for Hospitals,” November 8, 2010
2002 2003 2004 2005 2006 2007 2008 2009 20100%
10%
20%
30%
40%
50%
60%
70%
80%
Physician-Owned Hospital-Owned
Med
ical
Pra
ctic
e O
wne
rshi
p Ty
pe a
s a
% o
f Tot
al M
ed-
ical
Pra
ctic
e
Key Misalignment Themes
Source: BRG’s observations and experience
Data-based
decision
making/want all relevan
t informa
tionLack of busines
s training/decisio
n making authorit
ySkeptic
ism about
hospital’s
agenda/blame
hospital for
problems
Culture of
independence
and autono
myPatient
care pre-
eminent
regardless of marginLack of shared financia
l incentiv
es
Data less
timely, or
detailedReticen
t to share
all information/decision
making Lack of clinical training
Skeptic
ism about Doc’s
agendaWant
docs to play
with the hospital teamBlame docs for
problemsNo
Margin no
missionFinanci
al reward
s for perform
ance
Physicians Executives
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Six Steps for Engaging Physicians in Cost Improvement
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Step 1: Define the Need
Why should the Physicians Care? And Why Should They Participate?
Burning platform
Vision
Launching
Effective navigation
Results/Outcomes
Effective Communication
Creating and Articulating a Compelling Vision
• Effort will allow for capital and operational improvements”
Uninspiring
• Clarity• Patient-centric• Simple• Actionable
Key Elements
If you stumble at this step you will loose physicians therefore:• Be transparent about the challenges • Seek Physician leadership input into the vision• Seek physician leadership input into the communication plan
Extreme & Major Minor & Moderate
BOUKNIGHT BREARLEY
BROWN DELPHIA FOSTER
HALL
HENDRICKS
LAWTON
LIDELONE
MALANUK PHILLIPSRHINEHART
ROBERTSSTUCK
UMBACHVAN HORN WILLIAMS
BOUKNIGHT BREARLEY
BROWN DELPHIA FOSTER
HALL
HENDRICKS
LAWTON
LIDELONE
MALANUK PHILLIPSRHINEHART
ROBERTSSTUCK
UMBACHVAN HORN WILLIAMS
0.0
0.5
1.0
1.5
2.0
2.5
Quantity per Case
19
18
19
12
12
3
77
73
7
6
4
4
4
4
21
Benchmark - 1.4 15
38
4928
18
47
53
17 17 13
17
1610
12
3121
9 7Benchmark - 1.4
A Report from the CathPCI Registry of the National Cardiovascular Data Registry from 2011, published in the Journal of the American College of Cardiology, shows an aver-age of 1.4 stents used per patient.
Physician .. Physician L.. Physician .. Extreme & Major
0 10 20 30 40 50 60 70 80Excess Days
SC HEARTCENTER
FOSTER CAR
BROWN CAR
LONE CAR
HALL CAR
LIDE CAR
ORLANDINI CAR
7.511
3.315
5.19
2.816
3.411
2.12
LOS by Physician
Step 2:Share Clinical Cost Data and Let the MDs Help You Interpret It. Collect Detailed Clinical Cost Data and Share it with the MDs. Data and Share it with the MDs.
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Stent Usage per Case by Physician
• LOS by APR-DRG
• LOS by MD
• Benchmarking data (comparable/internal
• Cost per case by physician
• Breakdown of costs into categories
• Margin analysis
• Linkage to overall financial improvement
APR DRG 174 & 175 – PCI w & w/o AMI
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Avoiding Pitfalls – Gaining Alignment
Pitfalls Actions
• Hospitals’ financial, clinical-cost, and operational data will never be fully satisfactory to physicians
• MDs legitimately see every patient as different
• Many physicians may not understand the clinical-cost/financial data
• Many may be embarrassed to ask basic questions
• More complex data isn’t necessarily better –For MDs it’s not so much about statistical analyses as it is about precise, timely information for decision-making
•Set realistic expectations- “the data is directional”
• Acknowledge data shortfalls upfront
•Create ownership of the data by making it transparent and easily modifiable
•Be open and non-defensive in correcting errors
•Proactively explain all business jargon and financial terms in layman’s language
•Translate the data into message before presentation
•At a minimum use severity adjusted data
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Avoiding Pitfalls – Gaining Alignment
Pitfalls Actions
• They will ask “what about quality metrics”
• They will question the objectivity and quality-protection goal if you start with a must-hit financial target
• They need much more than just clinical cost information if they are to make decisions
• Incorporate quality metrics and address quality concerns
• Start with a process to identify a $ target not simply a $ target
• Be transparent with cost, revenue and any other data necessary for them to make informed decisions
Step 3: Shared Authority & ResponsibilityGeisenger • MD and administrator paired at every level. Both must agree on a budget and be able to speak
for each other at meetings• Incentive compensation and goals are the same• The capital allocation committee is chaired by a physician and most of the membership are
physicians
Mayo Clinic • “…What differentiates Mayo Clinic is the structure that makes the physician accountable for what
happens throughout the institution. If the institution fails, the physicians have only themselves to blame. This fact affects physician behavior at Mayo Clinic in a positive way. They must keep the institution’s interests in mind because those interests are aligned with their own.”
-John Herrell the Chief administrative Officer of Mayo Clinic from 1993-2001 is quoted in the book “Management Lessons from Mayo Clinic
-Interview with Dr Hamory Executive Vice President and Chief Medical Officer, Geisinger Health System 8/9/13
Source AHA Trendwatch Clinical Integration- The Key To Real Reform http://www.aha.org/research/reports/tw/10feb-clinicinteg.pdf
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Step 4: Provide the MDs with Structure and Guidance
Senior Exec Team
Steering Committee
Cardiology Workgroup
Orthopedics Workgroup
Hospitalists
General Surgery
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Avoiding Pitfalls – Gaining Alignment
Pitfalls Actions
• The physicians may not perceive it’s real decision-making authority
• The physicians will stall, become frustrated or go in the wrong direction without guidance
• The physicians don’t have as much time as administrators do to focus on financial improvement.
• Use combination of early wins, and permission to modify data, to show the MDs they have true co-leadership authority.
• Support the work of the committees
• Provide specialty-specific clinical-cost improvement expertise at least in initial stages
• Build on existing committees and hold evening/early morning sessions
Step 5: Focus On Initiatives That Simultaneously Reduce Costs and Improve Patient Care
Status Quo
Future State
Lower Cost
HigherQuality
Reduction in Unnecessary Costs
Protection or Enhancement
of Quality
Examples
• ICU Length of Stay
• Unnecessary Consults
• Unnecessary Imaging and labs
• Potentially Avoidable Conditions
• Blood Utilization
• Palliative Care
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Caveats / Consideration
If you don’t keep dollar savings targets (or at least cost-saving Initiatives for implementation) in front of MDs to ensure accountability for progress, efforts will become only about quality.
Therefore:
• Set up a tracking mechanism for documenting implementation
• Set up reporting mechanism from work groups to steering committee
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Step 6: Incentivize Physicians to participate in financial improvement
• Some of the incentives inherent in an physician co-led financial improvement effort are intangible/ non-monetary and apply to both employed and independent physicians:
• Leadership and career development• Ability to participate in decision-making• Ability to help patients • Ability to fix broken operational processes • Good hospital-citizen duties• Part of existing medical-leadership role
Source AHA Trendwatch Clinical Integration- The Key To Real Reform http://www.aha.org/research/reports/tw/10feb-clinicinteg.pdf
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Overcoming Pitfalls– Gaining Alignment
Pitfalls Actions
Some MDs may ask for compensation for spending time in meetings and contributing their expertise
• Set expectations upfront
• Explore incentive mechanisms e.g. co-management agreements
• Proactively develop a philosophy and plan regarding incentives
Questions?
